CSS Industries, Inc. Reports Results of Operations for the Three and Nine Months Ended December 31, 2012

2013-01-29 16:12 ET - News Release

PHILADELPHIA -- (Business Wire)

CSS Industries, Inc. (NYSE:CSS) announced today its results of
operations for the three and nine months ended December 31, 2012. As
previously announced, the Company sold the Halloween portion of its
Paper Magic Group, Inc. (“PMG”) business during the second quarter of
fiscal 2013. Under the terms of the purchase agreement, PMG retained
responsibility for the manufacture, sale and distribution of all PMG
Halloween products for the Halloween 2012 season. Net sales of the
Halloween business were $1,415,000 and $1,046,000 in the three months
ended December 31, 2012 and 2011, respectively, and were $29,345,000 and
$28,718,000 in the nine months ended December 31, 2012 and 2011,
respectively. Operating results for the three and nine months ended
December 31, 2012 reflect higher profitability compared to the same
periods in 2011 from the Halloween portion of the PMG business because
costs were reduced as a result of the sale.

Sales for the third quarter of fiscal 2013 decreased 10.2% to
$116,020,000 from $129,240,000 in the third quarter of fiscal 2012.
Income from continuing operations before income taxes for the third
quarter of fiscal 2013 was $17,020,000, compared to $18,857,000 in the
third quarter of fiscal 2012. Income from continuing operations for the
third quarter of fiscal 2013 was $11,601,000, or $1.21 per diluted
share, versus $12,109,000, or $1.24 per diluted share, in the third
quarter of the prior fiscal year. Net income for the third quarter of
fiscal 2013 was $11,611,000, or $1.22 per diluted share, versus
$10,978,000, or $1.13 per diluted share, in the third quarter of fiscal
2012.

Sales for the first nine months of fiscal 2013 decreased 4.0% to
$310,572,000 from $323,534,000 in the first nine months of fiscal 2012.
Income from continuing operations before income taxes for the first nine
months of fiscal 2013 was $27,945,000, compared to $29,677,000 in the
prior year. Income from continuing operations for the first nine months
of fiscal 2013 was $17,573,000, or $1.83 per diluted share, versus
$18,976,000, or $1.95 per diluted share, in the first nine months of
fiscal 2012. Net income for the first nine months of fiscal 2013 was
$17,628,000, or $1.84 per diluted share, versus $18,894,000, or $1.94
per diluted share, in the first nine months of the fiscal 2012. During
the first nine months of fiscal 2013, the Company incurred certain
charges as a result of the sale of the Halloween portion of PMG that
reduced the operating results for the nine months ended December 31,
2012 as shown in the table below:

First Nine Months of Fiscal 2013

As Reported Results

Halloween Charges, net

Non-GAAP Results

Income from continuing operations before income taxes

27,945,000

6,764,000

34,709,000

Income tax expense

10,372,000

1,532,000

11,904,000

Income from continuing operations

17,573,000

5,232,000

22,805,000

Diluted net income per common share - Continuing Operations

$ 1.83

$ 0.55

$ 2.38

The Company’s highly seasonal orientation has historically resulted in
operating losses in the first and fourth quarters of the fiscal year and
operating profits in the second and third quarters.

As previously announced in September 2012, the Company sold the
Halloween portion of its PMG business to Gemmy Industries (HK) Limited
(“Gemmy”). Under the terms of the purchase agreement, Gemmy acquired
certain tangible and intangible assets associated with PMG’s Halloween
business. As part of the transaction, PMG retained responsibility for
the manufacture, sale and distribution of all PMG Halloween products
(such as Halloween masks, costumes, make-up and novelties) for the
Halloween 2012 season. As a result of this transaction, CSS incurred
pre-tax charges, net of proceeds, of $6,764,000 during the second
quarter of fiscal 2013, which costs primarily relate to cash
expenditures for facility closures of $1,375,000, severance of
$1,282,000, professional and other costs of $1,341,000, and non-cash
asset write-downs of $2,336,000 (including $966,000 recorded in cost of
sales) and goodwill reduction of $2,711,000. The charges were offset by
proceeds of $2,281,000. In connection with the exit of the Halloween
product line, a portion of the goodwill associated with the Paper Magic
Group reporting unit is required to be allocated to the business being
sold. This allocation is made on the basis of the fair value of the
assets being sold relative to the overall fair value of the Paper Magic
Group reporting unit. During the third quarter and first nine months of
fiscal 2013, we paid $630,000 and $1,417,000, respectively, of cash
related to these expenses and we expect to pay the remaining cash
expenditures through fiscal 2016.

This press release includes “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995
including, among others, statements reflecting the timing and amount of
cash expenditures and the Company expects to pay through fiscal 2016 in
connection with its sale of the Halloween portion of its PMG business
during the second quarter of fiscal 2013. Forward-looking statements are
based on the beliefs of the Company’s management as well as assumptions
made by and information currently available to the Company’s management
as to future events and financial performance with respect to the
Company’s operations. Forward-looking statements speak only as of the
date made. The Company undertakes no obligation to update any
forward-looking statements to reflect the events or circumstances
arising after the date as of which they were made. Actual events or
results may differ materially from those discussed in forward-looking
statements as a result of various factors, including without limitation,
risks associated with the Company’s sale of the Halloween portion of its
PMG business during the second quarter of fiscal 2013, including the
risk that the Company’s future expenditures in connection with such sale
may exceed management’s current estimate of such expenditures; general
market and economic conditions; increased competition (including
competition from foreign products which may be imported at less than
fair value and from foreign products which may benefit from foreign
governmental subsidies); increased operating costs, including
labor-related and energy costs and costs relating to the imposition or
retrospective application of duties on imported products; currency risks
and other risks associated with international markets; risks associated
with acquisitions, including acquisition integration costs and the risk
that the Company may not be able to integrate and derive the expected
benefits from such acquisitions; the risk that customers may become
insolvent, may delay payments or may impose deductions or penalties on
amounts owed to the Company; costs of compliance with governmental
regulations and government investigations; liability associated with
non-compliance with governmental regulations, including regulations
pertaining to the environment, Federal and state employment laws, and
import and export controls, customs laws and consumer product safety
regulations; and other factors described more fully in the Company’s
annual report on Form 10-K for the fiscal year ended March 31, 2012 and
elsewhere in the Company’s filings with the Securities and Exchange
Commission. As a result of these factors, readers are cautioned not to
place undue reliance on any forward-looking statements included herein
or that may be made elsewhere from time to time by, or on behalf of, the
Company.

CSS’ consolidated results of operations for the three and nine months
ended December 31, 2012 and 2011 and consolidated condensed balance
sheets as of December 31, 2012, March 31, 2012 and December 31, 2011
follow:

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

December 31,

December 31,

2012

2011

2012

2011

Sales

$

116,020

$

129,240

$

310,572

$

323,534

Costs and expenses

Cost of sales

78,407

87,662

214,930

227,758

Selling, general and administrative expenses

20,509

22,446

61,934

65,533

Disposition of product line, net

-

-

5,798

-

Interest (income) expense, net

(1

)

73

(68

)

227

Other expense, net

85

202

33

339

99,000

110,383

282,627

293,857

Income from continuing operations before income taxes

17,020

18,857

27,945

29,677

Income tax expense

5,419

6,748

10,372

10,701

Income from continuing operations

11,601

12,109

17,573

18,976

Income (loss) from discontinued operations, net of tax

10

(1,131

)

55

(82

)

Net income

$

11,611

$

10,978

$

17,628

$

18,894

Net income (loss) per common share

Basic:

Continuing operations

$

1.22

$

1.25

$

1.83

$

1.95

Discontinued operations

$

0.00

$

(0.12

)

$

0.01

$

(0.01

)

Total

$

1.22

$

1.13

$

1.84

$

1.94

Diluted:

Continuing operations

$

1.21

$

1.24

$

1.83

$

1.95

Discontinued operations

$

0.00

$

(0.12

)

$

0.01

$

(0.01

)

Total (1)

$

1.22

$

1.13

$

1.84

$

1.94

Weighted average shares outstanding

Basic

9,548

9,723

9,594

9,733

Diluted

9,554

9,732

9,597

9,739

Cash dividends per share of common stock

$

0.15

$

0.15

$

0.45

$

0.45

(1) Total net income per share for certain periods does not foot
due to rounding.

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

December 31,

March 31,

December 31,

2012

2012

2011

ASSETS

Current assets

Cash and cash equivalents

$

53,347

$

66,135

$

10,489

Accounts receivable, net

94,445

45,026

107,808

Inventories

66,087

71,671

74,005

Deferred income taxes

4,834

3,595

3,751

Other current assets

13,704

15,441

13,529

Current assets of discontinued operations

-

183

13,900

Total current assets

232,417

202,051

223,482

PROPERTY, PLANT AND EQUIPMENT, NET

28,164

29,582

30,138

DEFERRED INCOME TAXES

195

1,184

4,633

OTHER ASSETS

Goodwill

14,522

17,233

17,233

Intangible assets, net

28,446

29,689

30,129

Other

7,046

6,825

9,316

Total other assets

50,014

53,747

56,678

Total assets

$

310,790

$

286,564

$

314,931

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accrued customer programs

$

7,089

$

3,298

$

6,149

Other current liabilities

45,717

33,069

47,757

Current liabilities of discontinued operations

499

2,390

5,680

Total current liabilities

53,305

38,757

59,586

LONG-TERM OBLIGATIONS

5,020

4,604

4,556

STOCKHOLDERS' EQUITY

252,465

243,203

250,789

Total liabilities and stockholders' equity

$

310,790

$

286,564

$

314,931

CSS Industries, Inc.

Reconciliation of Certain Non-GAAP Measures

(Unaudited)

(in thousands, except per share amounts)

Reconciliation and computation of income from continuing
operations before income taxes, income tax expense, income from
continuing operations and diluted income per share:

Nine Months Ended December 31, 2012

Income from

Continuing

Diluted Income

Operations

Income from

Per Share,

Before Income

Income Tax

Continuing

Continuing

Taxes

Expense

Operations

Operations (1)

As Reported

$

27,945

$

10,372

$

17,573

$

1.83

Related to cost of sales

966

354

612

0.06

Related to disposition of product line, net

5,798

1,178

4,620

0.48

Non-GAAP Measurement

$

34,709

$

11,904

$

22,805

$

2.38

Management believes that presentation of results of operations
adjusted for the affects of the disposition of the Halloween
product line provides useful information to investors with respect
to the Company’s operating results for the nine months ended
December 31, 2012 because it enhances comparability between the
reporting periods.

(1) Diluted Income Per Share, Continuing Operations does not foot
due to rounding.